STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Option Agreement"), dated as of January 22,
2001, between Charter One Financial, Inc., a Delaware corporation ("Grantee"),
and Alliance Bancorp, a Delaware corporation ("Issuer").
RECITALS
A. Grantee, Charter Michigan Bancorp, Inc., and Issuer have entered
into an Agreement and Plan of Merger (the "Merger Agreement") on even date
herewith;
B. As an inducement to Grantee to enter into the Merger Agreement,
Issuer has agreed to grant Grantee the Option (as hereinafter defined); and
C. The Board of Directors of Issuer has approved this Option
Agreement, the grant of the Option and the Merger Agreement.
AGREEMENT
In consideration of the mutual promises set forth below and in the
Merger Agreement, the parties agree as follows:
SECTION 1
OPTION
1.1 Option Grant. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms in this
Agreement, up to an aggregate of 1,848,700 shares of the fully paid and
nonassessable shares of the common stock, par value $0.01 per share, of Issuer
("Common Stock") representing 19.9% of the outstanding stock of the Issuer
without giving effect to shares subject to or to be issued pursuant to this
Option Agreement, at a price per share (the "Option Price") equal to $22.00.
1.2 Adjustment of Exercise Price. If Issuer issues or agrees to issue
any shares of Common Stock (other than shares of Common Stock issued pursuant to
stock options granted pursuant to any employee benefit plan prior to the date
hereof) at a price less than such average price per share (as adjusted pursuant
to subsection 5.2), the Option Price will be equal to such lesser price (in
which case such price, as adjusted, will be the Option Price).
1.3 Shares Subject to the Option.
1.3.1 In no event will the number of shares for which this
Option is exercisable exceed 19.9% of the issued and outstanding shares of
Common Stock immediately prior to such exercise without giving effect to any
shares subject or issued pursuant to the Option. The number of shares of Common
Stock that may be received upon the exercise of the Option and the Option Price
are subject to adjustment under this Option Agreement.
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1.3.2 If any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Option Agreement (other than
pursuant to (i) this Option Agreement or (ii) an event described in subsection
5.1 hereof), the number of shares of Common Stock subject to the Option will be
increased so that, after such issuance, such number together with any shares of
Common Stock previously issued pursuant hereto, equals 19.9% of the number of
shares of Common Stock then issued and outstanding without giving effect to any
shares subject or issued pursuant to the Option. Nothing contained herein or
elsewhere in this Option Agreement will be deemed to authorize Issuer to issue
shares in breach of any provision of the Merger Agreement.
SECTION 2
TRIGGERING EVENTS
2.1 Definitions. For purposes of this Option Agreement, the
following terms will have the meanings set forth below:
(a) "Acquisition Transaction" means (i) a merger or
consolidation, or any similar transaction, involving Issuer or any Issuer
Subsidiary (defined below), (ii) a purchase, lease or other acquisition of all
or any substantial part of the assets or deposits of Issuer or any Issuer
Subsidiary, or (iii) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities representing
10% or more of the voting power of Issuer or any Issuer Subsidiary.
Notwithstanding clause (i) above, the term "Acquisition Transaction" does not
include any mergers, consolidations or similar transactions entered into without
violating any of the terms of the Merger Agreement and (x) involving solely
Issuer and/or one or more wholly-owned (except for directors' qualifying shares
and a de minimis number of other shares) Subsidiaries of the Issuer, or (y) in
which the shareholders of Issuer immediately prior to the completion of such
transaction own at least 80% of the Common Stock of the Issuer (or the resulting
or surviving entity in such transaction) immediately after completion of such
transaction.
(b) "Holder" means any holder or holders of the Option.
(c) "Initial Triggering Event" means any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any Significant Subsidiary (an
"Issuer Subsidiary"), without having received Grantee's prior written consent,
enters into an agreement to engage in an Acquisition Transaction with any Person
other than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or
the Board of Directors of Issuer (the "Issuer Board") recommends that the
shareholders of Issuer approve or accept any Acquisition Transaction other than
the Merger.
(ii) Any Person other than the Grantee or a
Grantee Subsidiary acquires beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common Stock
(the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d)of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the "1934 Act");
(iii) The shareholders of Issuer vote and fail to
adopt the Merger Agreement at a meeting which has been held for that purpose or
any adjournment or postponement
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thereof, or such meeting is not held or is cancelled prior to termination of the
Merger Agreement if, prior to such meeting (or if such meeting is not held or is
cancelled, prior to such termination), it is publicly announced that any Person
(other than Grantee or a Grantee Subsidiary) has made, or publicly disclosed an
intention to make, a proposal to engage in an Acquisition Transaction;
(iv) (x) The Issuer Board fails to unanimously
recommend that the shareholders of Issuer adopt the Merger Agreement and
approve the transactions contemplated thereby, or the Issuer Board withdraws
or modifies (or publicly announces its intention to withdraw or modify) in
any manner adverse in any respect to Grantee its unanimous recommendation that
the shareholders of Issuer adopt the Merger Agreement and approve the
transactions contemplated thereby, (y) Issuer or any Issuer Subsidiary, without
having received Grantee's prior written consent, authorizes, recommends,
proposes (or publicly announces its intention to authorize, recommend or
propose) an agreement to engage in an Acquisition Transaction with any Person
other than Grantee or a Grantee Subsidiary, or (z) Issuer provides information
to or engages in negotiations or discussions with a third party relating to a
possible Acquisition Transaction.
(v) Any Person other than Grantee or a Grantee
Subsidiary has made a proposal to Issuer or its shareholders to engage in an
Acquisition Transaction and such proposal has been publicly announced;
(vi) Any Person other than Grantee or a Grantee
Subsidiary has filed with the SEC a registration statement or tender offer
materials with respect to a potential exchange or tender offer that would
constitute an Acquisition Transaction (or filed a preliminary proxy statement
with the SEC with respect to a potential vote by its shareholders to approve
the issuance of shares to be offered in such an exchange offer);
(vii) Issuer willfully or intentionally breaches
any covenant or obligation contained in the Merger Agreement in anticipation of
engaging in an Acquisition Transaction, and following such breach Grantee is
entitled to terminate the Merger Agreement (whether immediately or after the
giving of notice or passage of time or both); or
(viii) Any Person other than Grantee or a Grantee
Subsidiary (other than in connection with a transaction to which Grantee has
given its prior written consent) has filed an application or notice with the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board")
or other federal or state bank or thrift regulatory or antitrust authority, and
the application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(d) "Person" means any natural person, any legal entity, or
any syndicate or group within the meaning of "person" under Section 13(d)(3).
(e) "Significant Subsidiary" has the meaning assigned thereto
in Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC").
(f) "Subsequent Triggering Event" means any of the following
events or transactions occurring after the date hereof:
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(i) The acquisition by any Person (other than
Grantee or a Grantee Subsidiary) of beneficial ownership of 25% or more of the
then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering
Event described in subsection 2.1(c)(i) except that if the Triggering Event
is based upon an Acquisition Transaction described in subsection 2.1(a)(iii),
then the percentage referred to in subsection 2.1(a)(iii) will be 25%.
(g) "Exercise Termination Event" means any of (i) the
Effective Time of the Merger; (ii) termination of the Merger Agreement before an
Initial Triggering Event except a termination by Grantee pursuant to Section
8.01(e) or (f) of the Merger Agreement (each a "Listed Termination"); (iii) the
passage of eighteen months (or such longer period as provided in Section 10)
after termination of the Merger Agreement if such termination is either a Listed
Termination or follows of an Initial Trigger Event; or (iii) the acceptance by
Grantee of the $9 million liquidated damages from Issuer pursuant to Section
6.18 of the Merger Agreement.
2.2 Exercise of Option.
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2.2.1 Triggering Events. The Holder may exercise the Option,
in whole or part, if, but only if, both an Initial Triggering Event and a
Subsequent Triggering Event have occurred before an Exercise Termination Event,
provided that the Holder must have sent the written notice of such exercise (as
provided in subsection 2.2.3) within six months following such Subsequent
Triggering Event (or such later period as provided in Section 10).
2.2.2 Notice of Triggering Event. Issuer will notify Grantee
promptly in writing of the occurrence of any Initial Triggering Event or
Subsequent Triggering Event (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer is not a condition to the
right of the Holder to exercise the Option.
2.2.3 Notice of Exercise. If the Holder is entitled to and
wishes to exercise the Option (or any portion thereof), it will send to Issuer a
written notice (the date of which is the "Notice Date") specifying (i) the total
number of shares it will purchase pursuant to such exercise and (ii) a place and
date not earlier than three business days nor later than sixty business days
from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the Federal Reserve Board
or any other regulatory or antitrust agency is required in connection with such
purchase, the Holder will promptly file the required notice or application for
approval, will promptly notify Issuer of such filing, and will expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence will run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option will be deemed to occur on the Notice Date relating to that exercise.
2.2.4 Closing. At the closing referred to in subsection 2.2.3,
the Holder will (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Option Agreement to Issuer at its principal executive
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offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Option Agreement will not preclude the
Holder from exercising the Option.
2.2.5 Delivery of Certificates.
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(a) At the closing, simultaneously with the delivery
of immediately available funds as provided in subsection 2.2.4, Issuer will
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option is exercised
in part only, a new Option evidencing the rights of the Holder to purchase the
balance of the shares purchasable hereunder.
(b) Certificates for Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend that reads
substantially as follows:
The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor.
(c) The reference to the resale restrictions of the
Securities Act of 1933, as amended (the "1933 Act") in the above legend will be
removed by delivery of substitute certificate(s) without such reference if the
Holder has delivered to Issuer a copy of a letter from the staff of the SEC,
or an opinion of counsel, in form and substance reasonably satisfactory to
Issuer, to the effect that such legend is not required for purposes of the
1933 Act. The reference to the provisions of this Option Agreement in the
above legend will be removed by delivery of substitute certificate(s) without
such reference if the shares have been sold or transferred in compliance with
the provisions of this Option Agreement and under circumstances that do not
require the retention of such reference in the opinion of counsel to the Holder.
The legend will be removed in its entirety if the conditions in the preceding
two sentences are both satisfied. In addition, such certificates shall bear
any other legend as may be required by law.
2.2.6 Rights of Holder. Upon the giving by the Holder to
Issuer of the written notice of exercise of the Option provided for under
subsection 2.2.3 and the tender of the applicable purchase price in immediately
available funds, the Holder will be deemed, subject to the receipt of any
necessary regulatory approvals, to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer are then closed or that certificates representing such
shares of Common Stock have not then actually been delivered to the Holder.
Issuer will pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
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SECTION 3
COVENANTS OF ISSUER
Issuer agrees:
(a) that it will at all times maintain, free from preemptive
rights, sufficient authorized but unissued or treasury shares of Common Stock so
that the Option may be exercised without additional authorization of Common
Stock after giving effect to all other options, warrants, convertible securities
and other rights to purchase Common Stock;
(b) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed by
Issuer under this Option Agreement;
(c) promptly to take all action as may from time to time be
required (including (i) complying with all applicable premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (ii) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal thrift or banking law, prior
approval of or notice to the Federal Reserve Board or to any state or other
federal regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and
(d) promptly to take all action provided herein to protect
the rights of the Holder against dilution.
SECTION 4
EXCHANGE OR REPLACEMENT OF OPTIONS
This Option Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Option Agreement at the principal office of Issuer, for other Agreements
providing for Options of different denominations entitling the holder thereof to
purchase, on the same terms and subject to the same conditions as are set forth
herein, in the aggregate the same number of shares of Common Stock purchasable
hereunder. The terms "Option Agreement" and "Option" include any Agreements and
related Options for which this Option Agreement (and the Option granted hereby)
may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Option Agreement, and
(in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Option Agreement,
if mutilated, Issuer will execute and deliver a new Option Agreement of like
tenor and date. Any such new Option Agreement executed and delivered will
constitute an additional contractual obligation on the part of Issuer, whether
or not the Option Agreement so lost, stolen, destroyed or mutilated is at any
time enforceable by anyone.
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SECTION 5
ADJUSTMENT OF OPTION SHARES
5.1 Adjustment of Number of Shares. In addition to the adjustment in
the number of shares of Common Stock that are purchasable upon exercise of the
Option pursuant to Section 1 of this Option Agreement, the number of shares of
Common Stock purchasable upon the exercise of the Option and the Option Price
are subject to adjustment from time to time as provided in this subsection 5.1
and subsection 5.2 below. In the event of any change in, or distributions in
respect of, the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock purchasable upon
exercise of the Option will be appropriately adjusted and proper provision will
be made so that, in the event that any additional shares of Common Stock are to
be issued or otherwise become outstanding as a result of any such change (other
than pursuant to an exercise of the Option), the number of shares of Common
Stock that remain subject to the Option will be increased so that, after such
issuance and together with shares of Common Stock previously issued pursuant to
the exercise of the Option (as adjusted on account of any of the foregoing
changes in the Common Stock), it equals 19.9% of the number of shares of Common
Stock issued and outstanding immediately prior to such issuance.
5.2 Adjustment of Option Price. Whenever the number of shares of Common
Stock purchasable upon exercise hereof is adjusted as provided in subsection
5.1, the Option Price shall be adjusted by multiplying the Option Price by a
fraction, the numerator of which is equal to the number of shares of Common
Stock purchasable prior to the adjustment and the denominator of which is equal
to the number of shares of Common Stock purchasable after the adjustment.
SECTION 6
REGISTRATION OF OPTION SHARES
6.1 Registration. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer will, at the request
of Grantee delivered within twelve months (or such later period as provided in
Section 10) of such Subsequent Triggering Event (whether on its own behalf or on
behalf of any subsequent holder of this Option (or any part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a registration statement under the 1933 Act covering any shares
issued and/or issuable pursuant to this Option and will use its reasonable best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee will have the right to demand two such registrations. The
Issuer will bear the costs of such registrations (including, but not limited to,
Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto).
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6.2 Limitation on Registration Rights. Notwithstanding subsection 6.1,
if, at the time of any request by Grantee for registration of Option Shares as
provided in subsection 6.1, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided,
(a) that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder must
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and
(b) that if such reduction occurs, then Issuer will file a
registration statement for the balance as promptly as practicable thereafter as
to which no reduction pursuant to this Section 6 will be permitted or occur and
the Holder will thereafter be entitled to one additional registration and the
twelve month period referred to in subsection 6.1 shall be increased to
twenty-four months. Notwithstanding anything to the contrary contained herein,
in no event will the number of registrations that Issuer is obligated to effect
be increased by reason of the fact that there is more than one Holder as a
result of any assignment or division of this Option Agreement.
6.3 Information from Holder. Each Holder will provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer will become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer.
6.4 Notice to Other Parties. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.
SECTION 7
REPURCHASE EVENTS
7.1 Definitions. For purposes of this Section 7, the following
terms will have the meanings set forth below:
(a) "Option Repurchase Price" means to the amount by which (i)
the Market/offer price exceeds (ii) the Option Price, multiplied by the number
of shares for which this Option may then be exercised.
(b) "Repurchase Event" means the occurrence of any of the
following events or transactions after the date of this Option Agreement:
(i) the acquisition by any Person (other than Grantee
or a Grantee Subsidiary) of beneficial ownership of 50% or more of the then
outstanding Common Stock; or
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(ii) the consummation of any Acquisition Transaction
described in subsection 2.1(a) hereof, except that the percentage referred to in
clause (iii) thereof will be 50%.
(c) "Option Share Repurchase Price" means the Market/offer
price multiplied by the number of Option Shares designated by the Holder in any
repurchase request.
(d) "Market/offer price" means the highest of (i) the price
per share of Common Stock at which a tender or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest closing price for shares
of Common Stock within the six-month period immediately preceding the date the
Holder gives notice of the required repurchase of this Option or the Owner gives
notice of the required repurchase of Option Shares, as the case may be, or (iv)
in the event of a sale of all or any substantial part of Issuer's assets or
deposits, the sum of the net price paid in such sale for such assets or deposits
and the current market value of the remaining net assets of Issuer as determined
by a nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to Issuer, divided by the
number of shares of Common Stock of Issuer outstanding at the time of such sale.
In determining the Market/offer price, the value of consideration other than
cash will be determined by a nationally recognized investment banking firm
selected by the Holder or Owner, as the case may be, and reasonably acceptable
to Issuer.
7.2 Repurchase Request. At any time after a Repurchase Event (i) at the
request of the Holder, delivered prior to an Exercise Termination Event (or such
later period as provided in Section 10), Issuer (or any successor thereto) will
repurchase the Option from the Holder at the Option Repurchase Price and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) will repurchase the
number of the Option Shares from the Owner as the Owner designates at the Option
Share Repurchase Price.
7.3 Surrender of Option for Repurchase. The Holder and the Owner, as
the case may be, may exercise its right to require Issuer to repurchase the
Option and any Option Shares pursuant to this Section 7 by surrendering for such
purpose to Issuer, at its principal office, a copy of this Option Agreement or
certificates for Option Shares, as applicable, accompanied by a written notice
or notices stating that the Holder or the Owner, as the case may be, elects to
require Issuer to repurchase this Option and/or the Option Shares in accordance
with the provisions of this Section 7. As promptly as practicable, and in any
event within five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer will deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
7.4 Legal Restrictions on Repurchases.
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7.4.1 To the extent that Issuer is prohibited under applicable
law or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer will
immediately so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer
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prohibited from delivering, within five business days after the date on which
Issuer is no longer so prohibited. Issuer hereby undertakes to use its
reasonable best efforts to obtain all required regulatory and legal approvals
and to file any required notices as promptly as practicable in order to
accomplish such repurchase.
7.4.2 If Issuer at any time after delivery to it of a notice
of repurchase pursuant to subsection 7.3 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full, the Holder or Owner may
revoke its notice of repurchase of the Option and/or the Option Shares whether
in whole or to the extent of the prohibition.
7.4.3 In the event of a partial repurchase under subsection
7.3 or 7.4.1, Issuer will promptly (i) deliver to the Holder and/or the Owner,
as appropriate, that portion of the Option Repurchase Price and/or the Option
Share Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new Agreement evidencing
the right of the Holder to purchase that number of shares of Common Stock
obtained by multiplying the number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and the denominator
of which is the Option Repurchase Price, and/or (B) to the Owner, a certificate
for the Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event has occurred prior to the date of the delivery of notice by
Issuer described in clause 7.4.1, or is scheduled to occur at any time before
the expiration of a period ending on the thirtieth day after such date, the
Holder will nonetheless have the right to exercise the Option until the
expiration of such 30-day period.
SECTION 8
CHANGE IN CONTROL OF ISSUER
8.1 Definitions. For the purposes of this Section 8, the
following terms have the meanings indicated:
(a) "Acquiring Corporation" means (i) the continuing or
surviving Person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring Person in a plan of exchange in which Issuer is
acquired, (iii) the Issuer in a merger or plan of exchange in which Issuer is
the continuing or surviving or acquiring Person, and (iv) the transferee of all
or a substantial part of Issuer's assets or deposits (or the assets or deposits
of an Issuer Subsidiary).
(b) "Substitute Common Stock" means the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(c) "Assigned Value" means the Market/offer price, as defined
in subsection 7.1(d).
(d) "Average Price" means the average closing price of a share
of the Substitute Common Stock for the one year period immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on
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the day preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price will be computed with
respect to a share of common stock issued by the Person merging into Issuer or
by any company which controls or is controlled by such Person, as the Holder may
elect.
(e) "Change of Control Agreement" means an agreement (i) to
consolidate with or merge into any Person, other than Grantee or a Grantee
Subsidiary, or engage in a plan of exchange with any Person, other than Grantee
or a Grantee Subsidiary and Issuer is not the continuing or surviving
corporation of such consolidation or merger or the acquirer in such plan of
exchange, (ii) to permit any Person, other than Grantee or a Grantee Subsidiary,
to merge into Issuer or be acquired by Issuer in a plan of exchange and Issuer
is the continuing or surviving or acquiring corporation, but, in connection with
such merger or plan of exchange, the then outstanding shares of Common Stock
will be changed into or exchanged for stock or other securities of any other
Person or cash or any other property or the then outstanding shares of Common
Stock will after such merger or plan of exchange represent less than 50% of the
outstanding shares and share equivalents of the merged or acquiring company, or
(iii) to sell or otherwise transfer all or a substantial part of its or the
Issuer Subsidiary's assets or deposits to any Person, other than Grantee or a
Grantee Subsidiary.
8.2 Substitute Options.
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8.2.1 If before an Exercise Termination Event, Issuer enters
into a Change of Control Agreement then, the Change of Control Agreement will
make proper provision so that the Option shall, upon the consummation of any
such transaction and upon the terms and conditions set forth in this Option
Agreement, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (i) the Acquiring Corporation
(as hereinafter defined) or (ii) any Person that controls the Acquiring
Corporation.
8.2.2 The Substitute Option will have the same terms as the
Option, provided that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms will be as similar as possible
and in no event less advantageous to the Holder. The issuer of the Substitute
Option will also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement (after giving
effect for such purpose to the provisions of Section 9), which agreement will be
applicable to the Substitute Option.
8.2.3 The Substitute Option will be exercisable for such
number of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in subsection 8.2.1,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock will then be equal to the Option Price
multiplied by a fraction, the numerator of which will be the number of shares of
Common Stock for which the Option was exercisable immediately prior to the event
described in subsection 8.2.1 and the denominator of which will be the number of
shares of Substitute Common Stock for which the Substitute Option is
exercisable.
8.2.4 In no event, pursuant to any of the foregoing
subsections, will the Substitute Option be exercisable for more than 19.9% of
the shares of Substitute Common Stock outstanding immediately prior to exercise
of the Substitute Option. In the event that the Substitute Option would
11
be exercisable for more than 19.9% of the shares of Substitute Common Stock
outstanding immediately prior to exercise but for this subsection 8.2.4, the
issuer of the Substitute Option (the "Substitute Option Issuer") shall make a
cash payment to Holder equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this subsection 8.24 over (ii)
the value of the Substitute Option after giving effect to the limitation in this
subsection 8.24. This difference in value will be determined by a nationally
recognized investment banking firm selected by the Holder.
8.3 Requirements for Change in Control Agreement. Issuer will not enter
into any Change of Control Agreement unless the Acquiring Corporation and any
Person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
SECTION 9
REPURCHASE OF SUBSTITUTE OPTIONS OR SHARES
9.1 Definitions. For the purposes of this Section 9, the
following terms have the meanings indicated:
(a) "Highest Closing Price" means the highest closing price
for shares of Substitute Common Stock within the six-month period immediately
preceding the date the Substitute Option Holder gives notice of the required
repurchase of the Substitute Option or the Substitute Share Owner gives notice
of the required repurchase of the Substitute Shares, as applicable.
(b) "Substitute Option Repurchase Price" means the amount by
which the Highest Closing Price exceeds the exercise price of the Substitute
Option multiplied by its number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised.
(c) "Substitute Share Repurchase Price" means the Highest
Closing Price multiplied by the number of shares designated by the Substitute
Share Option.
9.2 Repurchase. At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") will repurchase the Substitute Option from the
Substitute Option Holder at the Substitute Option Repurchase Price, and at the
request of the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at the Substitute Share Repurchase Price.
9.3 Exercise of Repurchase Rights. The Substitute Option Holder and the
Substitute Share Owner, as the case may be, may exercise its respective rights
to require the Substitute Option Issuer to repurchase the Substitute Option and
the Substitute Shares pursuant to this Section 9 by surrendering for such
purpose to the Substitute Option Issuer, at its principal office, the agreement
for such Substitute Option (or, in the absence of such an agreement, a copy of
this Agreement) and/or certificates for Substitute Shares accompanied by a
written notice or notices stating that the Substitute Option Holder or the
Substitute Share Owner, as the case may be, elects to require the Substitute
Option Issuer to repurchase the Substitute Option and/or the Substitute Shares
in accordance with the provisions of this Section 9. As promptly as practicable
and in any event within five business days after the surrender of the Substitute
Option and/or certificates representing
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Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer will deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
9.4 Limitations on Repurchase.
-------------------------
9.4.1 To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer will
immediately so notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Option Repurchase Price and/or the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited. Substitute Option Issuer will use its
reasonable best efforts to receive all required regulatory and legal approvals
as promptly as practicable in order to accomplish such repurchase.
9.4.2 If the Substitute Option Issuer is, at any time after
delivery of a notice to it of repurchase pursuant to subsection 9.3, prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from delivering to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full, the Substitute Option
Holder and/or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
prohibition.
9.4.3 In the event of a partial repurchase under subsection
9.3 or 9.4.2, the Substitute Option Issuer will promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event has occurred prior to the date of the notice
delivered by the Substitute Option Issuer described in subsection 9.3, or is
scheduled to occur at any time before the expiration of a period ending on the
thirtieth day after such date, the Substitute Option Holder will nevertheless
have the right to exercise the Substitute Option until the expiration of such
30-day period.
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SECTION 10
EXTENSION OF EXERCISE PERIODS
The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 15 will be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
SECTION 11
ISSUER'S REPRESENTATIONS
Issuer hereby represents to Grantee as follows:
11.1 Authority, Approval and Validity. Issuer has full corporate power
and authority to execute and deliver this Option Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Option
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the Issuer Board prior to the date hereof and no
other corporate proceedings on the part of Issuer are necessary to authorize
this Option Agreement or to consummate the transactions contemplated herein.
This Option Agreement has been duly and validly executed and delivered by
Issuer, and constitutes a valid and binding obligation of Issuer, enforceable
against Issuer in accordance with its terms.
11.2 No Violations. This Option Agreement, and the transactions
contemplated by it are not subject to the requirements of any "moratorium,"
"control share", "fair price", "affiliate transactions", "business combination"
or other antitakeover laws and regulations of any state applicable to Issuer.
The provisions of Article "Eighth" of Issuer's certificate of incorporation do
not apply to the entering into of this Option Agreement and the transactions
contemplated hereby.
11.3 Reservation of Shares. Issuer has taken all necessary corporate
action to authorize and reserve and to permit it to issue, and at all times from
the date hereof through the termination of this Option Agreement in accordance
with its terms will have reserved for issuance upon the exercise of the Option,
that number of shares of Common Stock equal to the maximum number of shares of
Common Stock at any time and from time to time issuable hereunder, and all such
shares, upon issuance pursuant thereto, will be duly authorized, validly issued,
fully paid, nonassessable, and will be delivered free and clear of all claims,
liens, encumbrance and security interests and not subject to any preemptive
rights.
SECTION 12
LIMITS ON OPTION VALUE AND
SURRENDER OF OPTION
12.1 Definitions.
-----------
12.1.1 "Total Profit" means the aggregate amount (before
taxes) of the following: (i) the amount received by Grantee pursuant to Issuer's
repurchase of the Option (or any portion
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thereof) pursuant to Section 7, (ii) (x) the amount received by Grantee pursuant
to Issuer's repurchase of Option Shares pursuant to Section 7, less (y)
Grantee's purchase price for such Option Shares, (iii) (x) the net cash amounts
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which Option Shares are converted or exchanged) to any
unaffiliated party (but specifically excluding any amounts in excess of the
market value thereof on the date purchased by Grantee) less (y) the Grantee's
purchase price of such Option Shares, (iv) any amounts received by Grantee on
the transfer of the Option (or any portion thereof) to any unaffiliated party,
and (v) any amount equivalent to the foregoing with respect to the Substitute
Option. For purposes of this Section 12, Grantee includes every Holder of an
Option or a Substitute Option.
12.1.2 "Notional Total Profit" means, with respect to any
number of shares as to which Grantee may propose to exercise the Option, the
Total Profit determined as of the date of such proposed exercise assuming that
the Option were exercised on such date for such number of shares and assuming
that such shares, together with all other Option Shares held by Grantee and its
affiliates as of such date, were sold for cash at the closing market price for
the Common Stock as of the close of business on the preceding trading day (less
customary brokerage commissions).
12.1.3 "Surrender Price" means an amount equal to $9 million
(i) plus, if applicable, Grantee's purchase price with respect to any Option
Shares and (ii) minus, if applicable, the excess of (A) the net cash amounts, if
any, received by Grantee pursuant to the arms' length sale of Option Shares (or
any other securities into which such Option Shares were converted or exchanged)
to any unaffiliated party, over (B) Grantee's purchase price of such Option
Shares.
12.2 Limitations.
-----------
12.2.1 Notwithstanding any other provision of this Option
Agreement, in no event will the Grantee's Total Profit exceed $9 million and, if
it otherwise would exceed such amount, the Grantee, in its sole election, will
either (i) reduce the number of shares of Common Stock subject to this Option,
(ii) deliver to Issuer for cancellation Option Shares previously purchased by
Grantee, (iii) pay cash to Issuer, or (iv) any combination thereof, so that
Grantee's actually realized Total Profit does not exceed $9 million after taking
into account the foregoing actions.
12.2.2 Notwithstanding any other provision of this Option
Agreement, this Option, including any Substitute Option, may not be exercised
for a number of shares as would, as of the date of exercise, result in a
Notional Total Profit of more than $9 million; provided that nothing in this
sentence will restrict any exercise of the Option permitted hereby on any
subsequent date.
12.3 Surrender of Option.
-------------------
12.3.1 Grantee may, at any time following a Repurchase Event
and prior to the occurrence of an Exercise Termination Event (or such later
period as provided in Section 10), surrender the Option (together with any
Option Shares issued to and then owned by Grantee) to Issuer in exchange for a
cash fee equal to the Surrender Price; provided, however, that Grantee may not
exercise its rights pursuant to this subsection 12.3 if Issuer has repurchased
the Option (or any portion thereof) or any Option Shares pursuant to Section 7.
15
12.3.2 Grantee may exercise its right to relinquish the Option
and any Option Shares pursuant to this subsection 12.3 by surrendering to
Issuer, at its principal office, a copy of this Agreement together with
certificates for Option Shares, if any, accompanied by a written notice stating
(i) that Grantee elects to relinquish the Option and Option Shares, if any, in
accordance with the provisions of this Section 12 and (ii) accept the Surrender
Price. The Surrender Price will be payable in immediately available funds on or
before the second business day following receipt of such notice by Issuer.
12.3.3 To the extent that Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
paying the Surrender Price to Grantee in full, Issuer will immediately so notify
Grantee and thereafter deliver or cause to be delivered, from time to time, to
Grantee, the portion of the Surrender Price that it is no longer prohibited from
paying, within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to subsection 12.3.2 is prohibited under applicable
law or regulation, or as a consequence of administrative policy, from paying to
Grantee the Surrender Price in full, (i) Issuer will (A) use its reasonable best
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to make such payments, (B)
within five days of the submission or receipt of any documents relating to any
such regulatory and legal approvals, provide Grantee with copies of the same,
and (C) keep Grantee advised of both the status of any such request for
regulatory and legal approvals, as well as any discussions with any relevant
regulatory or other third party reasonably related to the same, and (ii) Grantee
may revoke such notice of surrender by delivery of a notice of revocation to
Issuer and, upon delivery of such notice of revocation, Issuer will return to
Grantee the certificates for Option Shares delivered pursuant to subsection
112.3.2, and the Exercise Termination Event will be extended to a date six
months from the date on which the Exercise Termination Event would have occurred
if not for the provisions of this subsection 12.3 (during which period Grantee
may exercise any of its rights hereunder, including any and all rights pursuant
to this subsection 12.3).
SECTION 13
MISCELLANEOUS
13.1 Assignment. Neither of the parties to this Option Agreement may
assign any of its rights or obligations under this Option Agreement or the
Option to any other Person, without the express written consent of the other
party, except that if a Subsequent Triggering Event occurs prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board or other applicable regulatory authority has approved an application by
Grantee to acquire the shares of Common Stock subject to the Option, Grantee may
not assign its rights under the Option except in (a) a widely dispersed public
distribution, (b) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (c) an assignment to
a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Grantee's behalf or (d) any
other manner approved by the Federal Reserve Board or other applicable
regulatory authority.
13.2 Best Efforts. Each of Grantee and Issuer will use its
reasonable best efforts to make all filings with, and to obtain consents of, all
third parties and governmental authorities necessary
16
to the consummation of the transactions contemplated by this Option Agreement,
including, without limitation, applying to the Federal Reserve Board under the
BHCA, to the extent required, for approval to acquire the shares issuable
hereunder, but Grantee will not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
13.3 Equitable Relief. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Option Agreement by either
party hereto and that the obligations of the parties hereto will be enforceable
by either party hereto through injunctive or other equitable relief. In
connection therewith both parties waive the posting of any bond or similar
requirement.
13.4 Severance. If any term, provision, covenant or restriction
contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Option Agreement will remain in full force and
effect, and will in no way be affected, impaired or invalidated. If for any
reason such court or regulatory agency determines that the Holder is not
permitted to acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in subsection 1.1
hereof (as adjusted pursuant to Section 5 hereof), it is the express intention
of Issuer to allow the Holder to acquire or to require Issuer to repurchase such
lesser number of shares as may be permissible, without any amendment or
modification hereof.
13.5 Notices. All notices, requests, claims, demands and other
communications hereunder will be deemed to have been duly given when delivered
in Person, by fax, telecopy, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
13.6 Governing Law. This Option Agreement will be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflict of law principles thereof (except to the extent that mandatory
provisions of Federal law are applicable).
13.7 Counterparts. This Option Agreement may be executed in two
or more counterparts, each of which will be deemed to be an original, but all of
which shall constitute one and the same agreement.
13.8 Expenses. Except as otherwise expressly provided herein, each of
the parties hereto will bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
13.9 Entire Agreement. Except as otherwise expressly provided herein or
in the Merger Agreement, this Option Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Option Agreement will inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assignees. Nothing in this Option Agreement, expressed
or implied, is intended to confer upon any
17
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Option Agreement, except as expressly provided herein.
13.10 Capitalized Terms. Capitalized terms used in this Option
Agreement and not defined herein will have the meanings assigned thereto in the
Merger Agreement.
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Each of the parties has caused this Option Agreement to be executed on
its behalf by its officer thereunto duly authorized, as of the date first above
written.
CHARTER ONE FINANCIAL, INC.
By \s\Robert J. Vana
----------------------------------------
Name: Robert J. Vana
Title: Senior Vice President, Chief
Corporate Counsel and Secretary
ALLIANCE BANCORP.
By \s\Kenne P. Bristol
----------------------------------------
Name: Kenne P. Bristol
Title: Chief Executive Officer
19